RBI eases repayment for stalled commercial realty projects

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Published: February 8, 2020 4:51:05 AM

The date of commencement of commercial operations (DCCO) of projects, to which their repayment schedule is linked, may be shifted “within the period of one year from the original DCCO stipulated at the time of financial closure for commercial real estate projects,” the central bank said in a circular.

RBI, commercial realty projects, DCCO, NPA, non-infrastructure loans, commercial real estate loansThe repayment schedule may be extended only for a period equal to or shorter than the extension in the DCCO, the RBI said.

The Reserve Bank of India (RBI) on Friday allowed banks to restructure commercial real estate advances and delay repayments for a period of up to two years. Earlier this week, the RBI had announced that lenders will be allowed to extend the repayment schedules for stressed commercial real estate projects for one year, without downgrading their asset classification.

The date of commencement of commercial operations (DCCO) of projects, to which their repayment schedule is linked, may be shifted “within the period of one year from the original DCCO stipulated at the time of financial closure for commercial real estate projects,” the central bank said in a circular. However, in cases where the projects are delayed for reasons beyond the control of promoters, banks may restructure these loans “by way of revision of DCCO up to another one year… and retain the ‘standard’ asset classification, if the account continues to be serviced as per the revised terms,” the circular said. The relaxation can only be availed by those projects which apply for the restructuring within one year of the expiry of the original DCCO.

The repayment schedule may be extended only for a period equal to or shorter than the extension in the DCCO, the RBI said. In 2014, the RBI had permitted the restructuring of non-infrastructure project loans for a period of up to two years. However, commercial real estate projects were kept outside the purview of this relaxation. With this, stressed commercial real estate loans will be treated at par with non-infrastructure loans.

However, the RBI said banks’ boards must ensure that the projects are viable before restructuring their loans. Banks may still classify these projects as NPA at any point before the commencement of commercial operations according to the record of recovery, RBI said. Projects for restructuring will be identified according to the central bank’s guidelines on classification of commercial real estate exposures.

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